Forces Shaping the Global Economy

The global economy

Humanity and the Earth, faced with rapidly increasing social tensions, economic
uncertainty and ecological disparities, is considered to be involved in a never ending turbulent
period, where the ongoing dynamics are shaping the present and building the corner-stone based
on which the future will be built upon. The orientation in a world of increasing complexity,
competition and uncertainty requires the gathering of the right information, in the right time and
the right context, to be capable of effectively focusing on salient problems, as to identify the
contribution that could be given to achieve a more prosperous and peaceful world.
Acknowledging that there are forces or factors that are drastically changing the global
economy at an extremely fast rate, it leads to believe that the necessity for adjustment is rather
unavoidable. In the eyes of many, global connections, the pace of technological changes and the
shifting demographic patterns are changes that society is constantly facing, but sometimes we
fail to understand that the individual strengths of such factors when combined together are
capable of creating a force that is extremely disruptive.
The following trends are considered to be one of the main challenges for policy makers,
where asymmetrical developments of such trends have triggered sharply divergent views of their
effects:
1) Global Connections
2) Urbanization
3) Technological changes
This paper aims to identify key outcomes of the general trends in the economy today and
how recent developments are supporting, and simultaneously damaging the world prosperity, by
initially providing perspectives or schools of thought on trade and production structure. And
finally, such paper concludes that asymmetrical globalization alone is not to be blamed for
poverty and hunger, but rules and trade regimes, property rights and migration contribute to the
unequal opportunities in a global economy that remains fundamentally unfair.

Global Political Schools of Thought

Each and every phenomenon is subject to diverse interpretations and explanations in
terms of the reasons underlying the phenomenon, the individuals responsible for the occurrence,
and how such phenomenon can be used to predict the future. Different theories have helped the
process of understanding the world around us in a more systematic manner, where the key
features of such theories assist in understanding the policy practices in the trade regime within
the international community. States throughout the years, in the process of building their
economic and political powers, have been influenced by Liberalism with its free-trade approach
and Mercantilism with the protectionism approach.
Liberalism, as the most influential perspective in the world today, has been employed in
the most key states and organization. Seeking efficiency and growth, liberals lobby for free trade,
absent of political interference, only if such intervention provides better infrastructure and legal
framework for the market to better operate. Additionally, such theory places emphasis on the
benefits that are triggered due to the trade and competition between actors, where all participants
would gain. On the other hands, at the heart of mercantilism theory is the idea that the
maximization of net exports is the most optimal path towards national prosperity and welfare.
Such national goal can be achieved by ensuring high number of exports, and fewer imports,
therefore, leading to the assumption that a country could gain only at the expense of others (zero-
sum game). Therefore, to secure a country’s economy from its rivals, protectionist policies
should be applied. An example of the implementation of protectionism is the EU Common
Agricultural Policy.

Other

In addition to such theories, Marxism argues that trade mainly benefits the dominant
class in society. It is considered that colonies had access to natural resources and minerals and
such colonies helped states develop in terms of production, but such production helped only the
wealthy classes. On the other side Keynesians placed importance on alternatives that would
increase production, and thus contribute to the increase in employment, rather than importing.
Reducing taxes, introducing tariffs, and increasing employment were the main elements of
Keynesians view of trade and production.
Undoubtedly, such theories have been effective in helping states to provide suitable
conditions to protect their economic and political interests. However, the more we advance in
time, the more we desire being free from existing constrains. Therefore, free trade, and
suggestions of liberalism may be the most suitable for international trade, given that free trade
provides foundation for stronger relations between states, creates employment opportunities, and
reduces the prices for many goods and services.

The Globalization Effect

Globalization, technological innovation and urbanization as complementary factors have
been the main determinants of the developments in the trade and production structure, as well as
in the knowledge and technology. While people continue arguing whether globalization came as
a result of free trade, or perhaps free trade fueled globalization, many others seek to draw certain
conclusions whether globalization has been exacerbating poverty and hunger.
Globalization reflects the increasing integration of societies and economies, where the
world does not witness only flows of goods, but also the exchange of ideas and information.
Indeed, opinions vary in terms of what outcomes have been triggered by globalization. Certainly,
is rather evident that the rules of the “new global economy” in various instances fail to provide
opportunities for the poor to develop.
The world after the World War II witnessed the reduction of many barriers to free trade.
Trade agreements such as World Trade Organization and the North American Free Trade
Agreement have helped the spread of globalization. Additionally, GATT by lowering the barriers
to international trade, and reducing transportation costs, created the environment for global
connections to occur. However, asymmetric globalization has been at the heart of furious debates
that aimed to identify the factors that are contributing to increasing poverty and hunger.
Some arguments provided by proponents of the idea that globalization is not increasing the
hunger but instead is reducing poverty are presented below:
1. Africa and South Asia (the countries that are least touched by globalization) are the
poorest in the world.
2. Based on World Bank reports, the percentage of the world’s population that is poor
declined from 25% to 21%.
3. China and India, among many other countries that opened and liberalized their markets
have been enjoying higher growth rates
4. Among various countries, even if inequality has increased, the poverty has generally
declined (In China, India, Costa Rica, Indonesia etc.)
5. For most countries, increases in trade volumes (due to globalization), resulted in higher
incomes.

However, while the interpretation of facts and definitions can vary, we can shift attention to
the asymmetric globalization effect on global economy, and how unequal opportunities
contribute negatively to global injustice.
Firstly, in terms of trade, the powerful countries dominate the design of rules, and in most
cases the protection of agriculture and textiles in U.S and Europe keeps most of the world’s poorest countries out of the market. Considering that agriculture and textile represent the sectors
that have the most potential in generating jobs for the poor, the tariffs and subsidies are only
damaging the poor, and making the effect of globalization even more asymmetrical.
Secondly, political constraints influence the way the rules are implemented. The use of
anti-dumping practices by U.S producers are resulting to be extremely dangerous for producers
in developing countries, yet the lack of political power and authority reduces the chances for the
poor to undertake certain measures to prevent such practices.
Thirdly, the migration is governed by rules that restrict the ability to reduce world
inequality. The data available show a much smaller permanent migration (in the last 25 years
only 2% of the world’s people have changed their permanent residence) relative to the past
because powerful countries restrict immigration. Consequently, a plumber from Kosova does not
have the opportunity to at least quintuple his income by just moving to Germany. The U.S allows
highly skilled workers to enter with temporary visas, but this again is an example of the capacity
of the already rich (in most cases only the rich have education opportunities) to benefit.
Finally, the intellectual property rights which are regulated by the WTO under TIPS, are
highly debatable since many argue that despite the benefits of safeguarding one’s intellectual
property, the western patent has not been helpful to poorest countries such as Kenya. The
minimum 20 year patent period for developing countries implies higher costs for many products
and reduces the possibility of domestic production of new products.

Conclusion

In a highly globalized world, where poverty is declining, and the inequality is leveling
off, policy makers and citizens of the globe should not be satisfied because the reasons for
concern continue to be considerably high. The number of countries where the economic growth
is minimal, the vulnerability of poor countries to financial crisis is high, and the asymmetric
globalization effects, trigger the necessity of fighting unfair rules of trade and globalization.
Indeed, providing proposals for the international community is rather easy, but it is politically
difficult to implement such proposals. However, the reform of the existing global institutions
could reduce globalization asymmetry, promote fairer rules of trade, property rights and
migration which would all contribute in a world that is more just.

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